Is your charity type fit for purpose?
When you set up a new charity you need to decide what sort of legal structure it will have – the options are:
- Charitable incorporated organisation (CIO)
- Charitable company
- Unincorporated association or
Each of these types of entity will have a different governing document which will determine how the charity will be run. The structure chosen will also affect the operation of the charity in terms of who will run it and whether it has a wider membership, whether the contracts that it enters into (with staff, customers, suppliers etc) are in the charities own name and whether the trustees will be personally liable for the charity or if it is a separate legal entity.
The first 2 types of charity listed above have a corporate structure and are considered to have their own identity in law. This is often seen as very beneficial especially to the trustees as (assuming they do not ignore their trustees’ responsibilities) it will limit their personal liability for the charity.
The downside of being a charitable company is the administrative burden of having to comply with regulations of both Charity Commission and Companies.
The CIO is a relatively new type of organisation which has the benefits of being a separate legal entity as described above and the benefit of having a single regulator, the Charity Commission.
In the past it has been quite common for unincorporated charities to transfer their activities and operations to a new charitable company and recently also to a new CIO.
We have assisted a number of charities with understanding the benefits of the different types of structure, if you think your structure may no longer be fit for purpose then we can do the same for you.
For further information, please contact 01772 821 021.